Euro to US Dollar Exchange Rate Retraces Losses as Investor Eurozone Jitters Fade
Earlier in the week, investors sold the Euro to US Dollar (EUR/USD) exchange rate amid concerns about Eurozone politics and the bloc’s slowing growth outlook. On Thursday though, the Euro (EUR) seemed to rebound and recover.
After opening the week at the level of 1.1405, EUR/USD tumbled for half of the week to touch a one-year-low of 1.1306 on Wednesday evening.
Since then though, EUR/USD has been recovering. At the time of writing on Thursday, EUR/USD had recovered most of its weekly losses.
The Euro’s recovery has been due to market-wide shifts in risk-sentiment, as the US Dollar’s (USD) recent resilient safe haven demand lightens.
Safe haven demand was weaker as global stock markets recovered from an October plummet. Poor performance in global equity markets had made investors hesitant to take risks lately.
Some stronger Eurozone inflation figures also helped to support the shared currency’s recovery.
Euro (EUR) Exchange Rates Supported by Recovering Appetite for Risk
Despite a stronger Eurozone Consumer Price Index (CPI) core inflation rate in October, the Euro saw weaker performance on Wednesday as it was weighed by other recent Eurozone data as well as market demand for the US Dollar.
Eurozone Gross Domestic Product (GDP) data disappointed earlier in the week, and Germany’s latest retail sales results were disappointing too.
On top of this though, poor performance in global stock markets throughout October left investors hungry for the safe haven US Dollar. As the US Dollar is the Euro’s biggest rival, this weighed on the shared currency’s strength.
On Thursday, that movement finally began to cool and the Euro strengthened.
Its gains were limited due to persistent concerns about Italy’s budget issues, and tensions between Italy and the EU. However, its strength was likely bolstered by Wednesday’s stronger than expected Eurozone core inflation report.
US Dollar (USD) Exchange Rates Slides from Highs despite Strong US Data
Investors sold the strong US Dollar from its best levels on Thursday, as global stock markets recovered and investor appetite for safe haven currencies like the US Dollar lightened.
According to Kit Juckes, strategist at Societe Generale, it was largely a reversal of movement seen towards the end of October:
‘We are doing the opposite from what we were doing yesterday. We’ve got a reasonably risk-friendly market, and with the new month we have some Dollar selling,’
However, the US Dollar’s downside potential is limited as the currency continues to find support in recent strong US data.
Wednesday’s US job market stats from ADP beat forecasts, and US Non-Farm productivity met forecasts in Q3 according to Thursday’s projection.
Analysts predict that amid trade jitters, strong US data and expectations for higher US interest rates, the US Dollar’s fundamentals are still particularly strong.
Euro to US Dollar (EUR/USD) Exchange Rate Recovery Could Continue if Eurozone PMIs Impress
As the Euro to US Dollar (EUR/USD) exchange rate heads back to the week’s opening levels in its recovery, the late-week data due for publication on Friday could influence whether the pair ends lower or higher.
Multiple key Eurozone and US ecostats will round out the week during Friday’s session.
The Eurozone’s final October manufacturing PMI will be published in the morning. As the projections were highly disappointing, stronger than expected manufacturing data could offer the Euro a boost.
The US data could be even more influential though. US Non-Farm Payrolls results from October will be published, as well as US trade balance and factory orders stats from September.
Of course, as traders hope for global stock markets to continue the recent recovery, demand for safe haven assets like the US Dollar may remain weak. This could help the Euro to further its advance and EUR/USD may end the week higher.
Looking ahead to next week, key data including US non-manufacturing PMI data and Eurozone retail sales could influence the Euro to US Dollar (EUR/USD) exchange rate.